I’ve made an offer on a house but the broker has told me it involves a “short sale.” How does that affect me as a buyer?

Short Sales have become more common as more and more homeowners find themselves “Under Water,” meaning that they owe more on their mortgage than their home is worth.  Normally, a homeowner Under Water would not be able to sell their home as the price a buyer would be willing to pay would not be enough to allow the homeowner to pay off their mortgage.  In the case of a Short Sale,  the seller’s mortgage lender has agreed to accept less than the amount due on the mortgage, so a sale can proceed.

How does this affect you as a buyer?  First, you must know that banks are not required to agree to a Short Sale, so the contract will have a clause allowing the seller to cancel the contract should their bank not agree to the sale.

Second,  timing will  be an issue as the process the seller must go through to obtain the bank’s approval of the Short Sale could be lengthy, often longer than the typical 60 days required to close an ordinary purchase. Therefore, as a buyer, the contract should, at the minimum, offer you an out if the short sale has not been approved before your mortgage commitment expires, for example.

Because of these and other complications involved, it is always best to speak to an attorney before making an offer to purchase a property in which the seller is seeking their bank’s approval of a Short Sale.

About George H. Dippel, Attorney at Law

George H. Dippel has been practicing law for over 30 years. He is a graduate of Cornell Law School and a former partner at the law firm of Rivkin Radler in their real estate/banking department. Mr. Dippel opened his own law offices in 1993 in Bayside, Queens, New York. Mr. Dippel has assisted thousands of clients throughout Queens, Brooklyn, The Bronx, Manhattan, Staten Island, Long Island and Westchester with their wills, probate, trusts, real estate and business matters. In addition to practicing law, Mr. Dippel has taught real estate courses in Long Island University’s paralegal program. He is also a licensed real estate instructor and has taught real estate licensing courses in the New York Metropolitan area. Mr. Dippel is admitted to practice in all New York State Courts and the Federal Eastern and Southern District Courts.
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